Hunton Employment & Labor Perspectives

On Thursday, the California Supreme Court ruled that employees must be paid for time spent undergoing security checks before leaving work.

A recent California appellate court decision has held that a banquet hall’s “mandatory service charge” could, under the right circumstances, be a “gratuity” that must be paid to employees under California Labor Code § 351. In O’Grady v. Merchant Exchange Productions, the defendant-employer added on a percentage service charge for all banquet contracts for food and beverages. Some, but not all, of the service charge was distributed to managers who did not serve food or beverages at the banquet. Plaintiff brought a putative class action alleging that the defendant’s practice of distributing the service charge proceeds to non-managerial banquet staff violated California Labor Code § 351, which states that gratuities are the sole property of the employees, and the employer (including managers) may not take any portion of the gratuity. The trial court held as a matter of law that a service charge cannot be a tip or gratuity under § 351 and dismissed the case.

As originally reported on the Hunton Retail Law Resource Blog, the US Chamber of Commerce, along with two other business-oriented groups, filed an amicus brief urging the Ninth Circuit to overrule a $102 million judgment against Wal-Mart.

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The California Second Appellate District has held that retail employees who were required to “call in” two hours before their scheduled shift to find out if they actually needed to report to work were entitled to reporting time pay. The Court held that California retail employees do not need to physically appear at the workplace in order to “report for work,” and be entitled to reporting time pay, under the Industrial Welfare Commission (“IWC”) Wage Order 7.  Given the robust dissent and sweeping change this decision could bring about, this is a case to watch as it may find its way to the California Supreme Court.

California was one of the leading states to tackle pay discrimination by banning inquiries into salary history.  California Labor Code Section 432.3, which went into effect on January 1, 2018, prohibits public and private employers from seeking or relying upon the salary history of applicants for employment.  But some of the law’s terms were undefined and some of the provisions were unclear, so after Section 432.3 went into effect, employers had questions about how to remain compliant with the law when hiring new employees.

The California Supreme Court issued a decision Monday in a case that is sure to cause headaches for employers when compensating employees through flat sum bonuses.  In Alvarado v. Dart Container Corporation of California (S232607) the Court held that for purposes of calculating the regular rate, a flat sum bonus is to be allocated only to the nonovertime hours worked. This holding departs from the calculation methods broadly considered compliant outside of California under the Fair Labor Standards Act (“FLSA”) and regulations issued by the U.S. Department of Labor.

The new year brings new laws for California employers to grapple with. Below we highlight the most significant new employment laws affecting California employers as of January 1, 2018.  Companies based in California or with operations in California are encouraged to review their policies and procedures in light of these developments.

California’s Fair Employment and Housing Commission recently amended its regulations to the state’s Pregnancy Disability Leave Law.  The new regulations provide expanded protections and clarifications with regard to employer obligations related to Pregnancy Disability Leave (“PDL”).  The regulations take effect on December 30, 2012.

A 2-1 California Court of Appeal held on October 17 that drivers for a food service provider did not have to arbitrate their state statutory claims brought under the California Labor Code despite a binding arbitration agreement covering the “application or interpretation” of the driver agreements.  The drivers alleged that their employer, Mike Campbell & Associates, misclassified them as independent contractors, denying them wage law protections under the California Labor Code, and was thus liable for nonpayment of wages, illegal deductions, and recordkeeping violations.  Rather than challenge the trial court’s ruling that they were bound by the arbitration clause, the drivers argued that their statutory claims did not arise out of the arbitration agreement and thus did not require an interpretation of the arbitration clause. 

The Bright v. 99 Cents Only Stores decision, issued by the California Court of Appeal for the Second Appellate District last November, illustrates a recent wage and hour class action litigation trend against retail employers in California over lack of “suitable seating” for their employees. The California Supreme Court denied review of this case in February 2011.